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EarthLink throws book at Charter

In a court battle with roots stretching back to the 2000 merger of AOL and Time Warner, EarthLink has lobbed a lawsuit at Charter Communications alleging that the cable operator is duping customers into switching providers, trashing EarthLink's brand and, more generally, "unfairly and improperly diminishing competition" for broadband services.

Per a lawsuit filed this week with the Supreme Court of the State of New York, County of New York, EarthLink alleges that Charter's customer service reps have falsely informed EarthLink customers, among other things, that EarthLink is "out of business" and Charter has "taken over" EarthLink. EarthLink attributed some of those alleged instances to a self-described informal survey conducted in July involving customers that had recently canceled EarthLink service.

"These false statements have reduced connectivity options for customers when they need them most, damaged EarthLink's reputation and brand, and directly resulted in lost customers," EarthLink claimed.

Charter declined to comment.

Expiring deal
Given the vitriol of EarthLink's allegations, it might surprise some to know that EarthLink and Charter are still technically business partners.

Under the terms of an agreement that's set to expire on October 31, Charter currently sells EarthLink an unbranded, wholesale version of Charter's high-speed Internet service that EarthLink markets and resells under its own brand. EarthLink says about 50,000 subs (largely clustered in parts of New York, California and the Carolinas) receive service via the Charter agreement.

Charter handles the billing and EarthLink customers are also instructed to call Charter reps about billing and technical issues. However, those subs are routed to EarthLink call centers for issues involving their EarthLink email.

Rooted to the AOL-Time Warner merger
This arrangement has a history stemming from the 2000 merger of AOL and Time Warner, which included a stipulation that Time Warner strike a high-speed services deal that enabled EarthLink to offer its service over the Time Warner network. That deal was updated in 2006, and inherited by Charter when it acquired Time Warner Cable (TWC) in 2016. EarthLink estimates that it has paid Charter and TWC more than $150 million in the past five years for use of the network and to compensate for the handling of billing and service issues.

EarthLink – which was acquired by Windstream in February 2017 followed by Windstream's sale of EarthLink's consumer business to Trive Capital in late 2018 – said Charter elected to terminate the agreement at the end of October 2020.

During the current "transition period," EarthLink can't add new subs, but can continue to service existing customers. However, EarthLink claims that Charter's alleged attempts to convince customers to switch service to the cable operator using misleading information violates the terms of the still-active agreement.

EarthLink said it has tried to forge a new deal with Charter over the past year, but claims the cable op has been reluctant to negotiate a new, or fair, agreement in part because Charter indicated it is no longer willing to have wholesalers such as EarthLink on its cable systems and because Charter would prefer to purchase the customer contracts from EarthLink outright.

EarthLink said Charter offered EarthLink $2 million in July 2020 to purchase the service subscriber contracts and to have EarthLink provide support for email access for 90 days. The offer boils down to less than $40 per customer contract (including the costs for EarthLink to provide support), a fraction of the $300 to $400 value that Charter had previously assigned to customer contracts coming from EarthLink and other, similar "inferior" customer acquisition channels, EarthLink claimed.

Charter, EarthLink added, "has engaged in a campaign to dupe EarthLink high-speed Internet customers into switching providers to Charter in advance of the upcoming final termination of the contractual relationship between EarthLink and Charter."

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— Jeff Baumgartner, Senior Editor, Light Reading

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